China isn’t a country that cares a lot about human lives or human rights. Their #1 focus is economic growth and progress. So, I was a little surprised when I first heard about China’s draconian policies about containing the coronavirus epidemic.
Just a few weeks earlier, Chinese government officials tried to silence whistle blowers, hide data, and downplay the significance of this deadly virus outbreak. I am not trying to score political points here. I am just trying to understand what is really going on, so that I make the right decisions regarding my family and my investments.
According to New York Times, more than 150 million people in China are “living under government restrictions on how often they can leave their homes”. Starbucks Corporation (NASDAQ:SBUX) closed more than half of its stores in China in January and they stayed closed until a couple of days ago. Currently 15% of Starbucks’ stores are still closed. YUM China Holdings (NYSE:YUMC) closed 30% of its KFC, Pizza Hut, and Taco Bell stores and sales were down nearly 50% in open stores. I don’t think the situation is much different in industries either.
Basically, China put a large percentage of its cities and economy in a virtual lockdown. Why? They only reported 80,000 coronavirus cases and nearly 3000 deaths. Are these numbers really accurate?
In a separate article we calculated the new coronavirus’ fatality rate. The upper bound for our estimate is 0.5%. The actual rate is likely to be between 0.2% and 0.5%. COVID-19 isn’t as deadly as we feared. That’s the good news. Unfortunately, it is a very stealthy virus that can easily evade detection.
One major implication of our estimated fatality rate is that only one out of every 200 to 500 infected people will die from the new coronavirus. This also means that if we see 10 deaths in a country due to the coronavirus, it is safe to assume that between 2000 and 5000 are already infected with the virus. We will use this fact to make very powerful observations about China, Iran, Italy, and United States below.